Houston —
The premium suboctane gasoline differential in Tulsa, Oklahoma, began 2018 well above levels seen during the first trading days of January 2017, which seems attributable to ongoing cold weather-related refinery issues in the US Midwest, sources said Wednesday.

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On Tuesday, the first day of cash trading in 2018, S&P Global Platts assessed premium suboctane at the NYMEX February RBOB futures contract plus 14.50 cents/gal, well above the same assessment on January 3, 2017, at February futures plus 2.50 cents/gal.

On a flat price basis, premium suboctane in the first trading day of 2018 was assessed more than 15% higher than on the first day of trading in in 2017.

This can be partially explained by the front-month RBOB futures contract, which settled at 162.18 cents/gal on January 3, 2017 and at 176.31 cents/gal on Tuesday.

Sources have also said severe cold weather in the Midwest has continued to upset regional gasoline output, supporting prices by limiting supplies. Midwest premium suboctane is in "short supply right now," one source said.

A second source agreed, pointing to a couple of different refinery troubles in the region. "Citgo's Lemont refinery had flaring earlier this week and today [I] heard of a snag at [Phillips 66's] Borger" facility, a refinery, that, while located in Texas, supplies gasoline to Oklahoma.

On Wednesday, the Borger refinery notified state regulators in Texas of flaring at the facility. This flaring was likely caused by cold weather.

A third source said issues at the Wood River refinery in Illinois, which supplies the Chicago market, also helps explain stronger Midwest differentials. A spokesman for the Phillips 66-operated refinery in Roxana, Illinois, said the facility is back up and running after a small fire in a crude unit on Friday. After the fire, flaring occurred at the facility due to problems associated with extremely cold temperatures.

Drawing support from these refinery issues, premium suboctane was assessed at NYMEX February RBOB plus 15 cents/gal Wednesday, climbing 50 points day on day, after trading at that level in the late morning. This brings the suboctane-premium suboctane spread to 20 cents/gal, compared with the 5.50 cents/gal spread between the Platts assessments on the first trading day of 2017.